Chevron and its allies take aim at California's Low Carbon Fuel Standard

San Ramon-based Chevron is leading an aggressive campaign to delay implementation of California's Low Carbon Fuel Standard, a cornerstone of the state's efforts to reduce greenhouse gas emissions.

The fuel standard requires the oil industry to gradually reduce the "carbon intensity" of transportation fuels like diesel and gasoline by at least 10 percent by 2020. Chevron and its allies, including the Western States Petroleum Association, are trying to undermine the standard by rallying opposition, financing critical studies and lobbying the Democratic-controlled Legislature, state agencies and Gov. Jerry Brown.

The political pushback comes as compliance regulations ratchet up and climate change has re-emerged as a top priority for both Brown and President Barack Obama. California's attempts to rein in greenhouse gases are widely seen as a possible playbook for regulatory action at the regional or national level.

Chevron and the Western States Petroleum Association argue that the 2020 timeline can't be met without severe economic impacts, including a huge spike in gasoline prices.

"California's Low Carbon Fuel Standard establishes an unworkable program that will not meet its goals," Chevron spokesman Brent Tippen said in an interview. "The Air Resources Board should undertake an immediate and accelerated review of the program and make fundamental changes to its design and the timing of its implementation."

Advertisement

Critics of the fuel standard stress that alternative, low-carbon biofuels, particularly cellulosic ethanol made from materials like wood or grasses, are not being produced in high enough volumes to significantly offset the use of traditional fuels.

"Cellulosic ethanol was supposed to be the silver bullet," said Catherine Reheis-Boyd, president of the petroleum association. "Everyone thought we'd have large volumes at commercial scales, and that has not happened and will not happen in this time frame. It's time for all of us to revisit this."

But clean air advocates, environmentalists, utilities and the auto industry remain strong supporters of the fuel standard, and say it's time for the oil industry to step up and do its part. They note that utilities such as PG&E are well on their way to meeting a state mandate to purchase 33 percent of their electricity from renewable sources by 2020, while automakers have invested billions to meet tough new fuel efficiency requirements and produce electric cars.

"The oil industry is not doing its fair share," said Simon Mui, a scientist with the Natural Resources Defense Council. "They can invest in cleaner fuels, but instead they are fighting this policy tooth and nail."

The Low Carbon Fuel Standard was enacted in 2007 as part of AB32, the landmark global warming bill championed by then-Gov. Arnold Schwarzenegger. It's now being challenged not only by the oil industry but also several corn-based ethanol producers from the Midwest, who argued in federal court that California's regulations violate the Commerce Clause of the U.S. Constitution and are shutting them out of the market because of the way various fuels are rated. That lawsuit is currently under review by the 9th U.S. Circuit Court of Appeals; a decision could come any day.

Under the standard, fuels -- from gasoline to ethanol made from corn, sugar or cellulosic materials -- are given carbon intensity "scores" by state regulators. Carbon intensity is measured by the entire life cycle of the fuel -- from the well to the wheel -- taking into account greenhouse gas emissions from extracting and refining to transporting the fuels to local gas stations.

The main aim of the fuel standard is to push the oil industry to invest in new technology and cleaner fuels like electricity, biofuels, hydrogen and natural gas. Some critics, including Assemblyman Mike Gatto, D-Los Angeles, warn that the fuel standard could negatively impact food prices and land use as more farmland is used to grow crops for ethanol.

However, Dan Sperling, a founding director of the Institute of Transportation Studies at UC Davis who serves on the Air Resources Board, says transportation accounts for 40 percent of greenhouse gas emissions in California and therefore must be addressed.

"If we are going to have a reduction in greenhouse gases from transportation, something has to be done with the fuels," he said.

Last year, the petroleum association hired the Boston Consulting Group to conduct a study of the new standard that concluded it and other clean fuel regulations could force the closure of up to half of California's 14 refineries, throw thousands out of work and cause a spike in gas prices -- strong arguments in a state with 9.8 percent unemployment.

"The BCG study predicts that gasoline prices could increase by up to $2.50 per gallon, bringing California's per-gallon price into the $6 range," said Bill Day, a spokesman for Valero, which has a refinery in Benicia. "That's about the last thing that the state's still-weak economy needs."

Others dismissed the analysis as industry-funded and flawed.

"The analysis cherry-picks its assumptions to build a one-sided case showing a dismal economic future for oil refiners," said Susan Frank of the California Business Alliance for a Green Economy.

Chevron is marshaling its attack, in part, through Fueling California, a nonprofit organization it founded in 2008, shortly after the new standard was adopted. The group represents corporate fuel consumers such as Wal-Mart and UPS, and says it provides a "new and united voice on behalf of major fuel consumers." Fueling California is a 501(c) 4 organization, which means it can lobby state agencies and legislators but is not required to disclose its donors. A spokeswoman confirmed that "the majority of our funding comes from Chevron."

Lobbying records with the Secretary of State's Office show that Fueling California spent $282,620 in the 2011-12 legislative session lobbying the governor's office, lawmakers, the air board and other state agencies, largely on the Low Carbon Fuel Standard.

Last week, Fueling California held an invitation-only "technical workshop" for roughly 50 people at a hotel in Burbank. The daylong event, which was closed to the media, was attended by representatives from oil companies and the natural gas and biofuels industry. Assemblywoman Susan Bonilla, D-Concord, who has four refineries in her East Bay district, gave closing remarks.

"It was a very technical discussion, and people disagreed with each other," Bonilla said. "The consensus forming is that there are problems with the implementation timeline."